Gulf States Utilities Co. v. Alabama Power Co.
| Decision Date | 25 August 1987 |
| Docket Number | No. 86-2802,86-2802 |
| Citation | 824 F.2d 1465 |
| Parties | GULF STATES UTILITIES CO., Plaintiff-Appellee, v. ALABAMA POWER CO., Georgia Power Co., Gulf Power Co., Mississippi Power Co., the Southern Co., and Southern Company Services, Inc., Defendants-Appellants, Louisiana Public Service Commission, Movant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Charles M. Crook, Montgomery, Ala., Rodney O. Mundy, James H. Miller, III, Dan H. McCrary, Birmingham, Ala., for Alabama & Southern Co., Services.
Robert H. Forry, Robert P. Edwards, Jr., Atlanta, Ga., for Georgia & The Southern Co.
Basile J. Uddo, Frank J. Uddo, Elizabeth H. Porter, New Orleans, La., for LPSC.
Ben H. Stone, Gulfport, Miss., for Mississippi Power Co.
G. Edison Holland, Jr., Robert L. Crongeyer, Pensacola, Fla., for Gulf Power Co.
John G. Bissell, Beaumont, Tex., for all petitioners.
Orgain, Bell & Tucker, Paul W. Gertz, Beaumont, Tex., Taylor, Porter, Brooks & Phillips, Tom F. Phillips, Fredrick R. Tulley, Baton Rouge, La., for plaintiff-appellee.
Appeals from the United States District Court for the Eastern District of Texas.
Before WILLIAMS and HILL, Circuit Judges, and MENTZ *, District Judge.
Gulf States Utilities sued the Southern Companies over two contracts for the purchase and sale of electricity. The district court took jurisdiction over the case pursuant to 28 U.S.C. Secs. 1332 (diversity of citizenship) and 2201 (declaratory judgment). Southern appeals, asserting lack of jurisdiction in the district court. 1 Southern's contention is that the Federal Power Act preempts Gulf States' claims and that only the Federal Energy Regulatory Commission may resolve this case. We affirm the district court's exercise of jurisdiction.
Gulf States Utilities ("GSU") and the Southern Companies ("Southern") are public utilities engaged in the interstate purchase and sale of electricity. As such, they are regulated by the Federal Power Act ("FPA"), 16 U.S.C. Sec. 824 et seq. Under the FPA, public utilities are limited to charging just and reasonable rates for electricity sold in interstate commerce. 16 U.S.C. Sec. 824d(a). The Federal Energy Regulatory Commission ("FERC") has exclusive jurisdiction over interstate wholesale power rates: utilities must file their rates with the FERC, and the FERC can approve or alter such rates. 16 U.S.C. Sec. 824e(a); Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 2352, 90 L.Ed.2d 943 (1986).
Southern makes electricity mainly from coal, while GSU uses mainly oil and gas to produce its electricity. GSU sells most of its electricity to customers in Louisiana and Texas at rates regulated by, respectively, the Louisiana Public Service Commission ("LPSC") and the Public Utilities Commission of Texas ("PUCT").
In 1982, GSU contracted to buy electricity from Southern through 1992. Apparently, GSU forecasted that through 1992 (1) demand for its electricity would increase and (2) electricity produced by coal would be cheaper than electricity produced by oil and gas. GSU now alleges, however, that both (1) oil and gas prices and (2) the demand for electricity in Louisiana and Texas fell after 1982. In addition, the PUCT allegedly reduced the rate that GSU may charge its retail customers, refusing to allow GSU to recover the full cost of the electricity it buys from Southern. Because of these factors, GSU wants to avoid its contractual obligations to buy electricity from Southern.
On February 25, 1982, GSU and Southern signed two contracts. One contract, the Unit Power Sales ("UPS") contract, provided that GSU would buy 500 megawatts ("MW") per year of electricity through 1992. It also provided:
Sec. 2.2.1: In the event either party desires to increase or decrease capacity sales or purchases ..., the parties agree to negotiate in good faith and with diligence to proceed to evaluate alternatives which may reasonably provide for such desired change in capacity; provided, that no such change shall be made except upon mutual written agreement of the parties hereto.
The other contract, the "Interchange" contract, governed the connections between GSU's and Southern's facilities. The Interchange contract provided, in Sec. 9.4, that "[i]n the event this CONTRACT is changed or modified by any regulatory agency or authority, either party, if adversely affected, shall have the right to negotiate for the necessary relief to alleviate said adverse effects...."
On May 12, 1982, GSU and Southern amended the UPS contract to increase the amount of electricity purchased after May 1985 to 1,000 MW/year. As required by the FPA, GSU and Southern filed the Interchange and amended UPS agreements with the FERC. See 16 U.S.C. Sec. 824d(c).
On December 6, 1983, GSU and Southern again amended the UPS agreement, this time to reduce the amount of electricity to be purchased by GSU between 1985 and 1992. 2 Also on December 6, 1983, GSU and Southern amended the Interchange contract by adding "Schedule E." Under Schedule E, GSU agreed to supplement its basic UPS purchases between 1985 and 1992 by buying available "Long Term Power." The term "Long Term Power" means "capacity and energy existing on [Southern's] system ... not needed at that time ... to meet its own system requirements (including power used for pumping at pumped storage hydroelectric projects) and [Southern's] other power sale commitments ... taking precedent before delivery under this Schedule [E]." In all, GSU agreed to buy enough available Long Term Power to maintain its total purchases from Southern at 1,000 MW/year between 1985 and 1992. 3 Long Term Power is cheaper than UPS power, and the FERC approved Schedule E and the 1983 amendments to the UPS contract.
As set out above, GSU claims that demand for its electricity has decreased and that lower oil and gas prices have made Southern's coal-generated electricity relatively more expensive than electricity made from oil and gas. In addition, the PUCT reduced the rates that GSU could charge its customers and did not let GSU pass through to customers the cost of electricity bought from Southern. For these and other reasons, GSU requested renegotiation of its obligations under the UPS and Interchange contracts. GSU and Southern negotiated unsuccessfully until July 2, 1986, when GSU sued Southern in federal district court.
GSU's complaint explained that both GSU and Southern originally assumed that their contracts would be mutually beneficial through 1992 but that unforeseeable market conditions and PUCT decisions have spoiled the deal for GSU. GSU apparently searched the lawbooks to unearth every conceivable cause of action. First, it claims that Southern refused to renegotiate its contracts in good faith. This failure allegedly constitutes a breach of contract and also a breach of an independent duty to act in good faith. GSU also claims that, in making the contracts, Southern never intended to renegotiate in good faith but fraudulently promised to do so. GSU also pleads that Southern "unconscionably" exploited GSU and breached an "implied warranty" to renegotiate, in violation of the Texas Deceptive Trade Practices Act ("DTPA"). GSU also alleges that unforseeable actions of the PUCT and changes in market conditions (1) legally excuse GSU's performance, (2) render GSU's performance commercially impracticable, (3) frustrate the purpose of the GSU-Southern contracts to serve the public, and (4) manifest mutual and unilateral mistakes in the making of the contracts. GSU also claims that its contracts with Southern are unconscionable. Finally, GSU claims that Southern has exaggerated the amount of available "Long Term Power" that GSU must buy under Schedule E. Specifically, GSU asserts that Southern is engaging in "cannot lose" dealing by buying inexpensive, oil-and-gas-generated electricity from GSU and selling it right back to GSU at a profit under Schedule E. GSU seeks money damages and an order voiding the contracts.
The main issue in this appeal is whether the district court--or only the FERC--has jurisdiction over GSU's multi-faceted complaint. A subordinate issue is raised because shortly after filing suit GSU stopped making payments to Southern and started depositing the money due under its contracts into the registry of the district court. Over Southern's objection, the district court accepted these funds under Fed.R.Civ.P. 67. Southern claims on appeal that the deposits are improper. Finally, a third issue is raised by a motion of the LPSC to intervene in GSU's suit under Fed.R.Civ.P. 24. The district court denied the LPSC's request, and the LPSC appeals.
In this opinion, we first hold that the district court does have jurisdiction over at least some aspects of this suit because the FERC's jurisdiction over GSU's complaint is not exclusive (Part II) or primary (Part III). Then we hold that the district court did not abuse its discretion by allowing GSU to deposit with the court payments allegedly due under the contracts (Part IV), but that the district court erred in barring intervention in this litigation by the LPSC (Part V).
The FPA gives the FERC exclusive jurisdiction over interstate wholesale electricity rates. See 16 U.S.C. Secs. 824-824e. The FPA permits utilities to charge only just and reasonable rates and to file their rates and sales contracts with the FERC. 16 U.S.C. Sec. 824d(a-c). The FERC may review the filed rates and, if it finds a rate to be unjust or unreasonable, it may fix a just and reasonable rate. 16 U.S.C. Sec. 824e(a).
Through the FPA, Congress preempted states, state courts, and even federal courts from acting in areas reserved exclusively for the FERC. 4 For example, under the FPA, a buyer or seller of electricity may not sue in co...
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